Correlation Between Vanguard Real and SPDR Portfolio

Can any of the company-specific risk be diversified away by investing in both Vanguard Real and SPDR Portfolio at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Real and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Real Estate and SPDR Portfolio SP, you can compare the effects of market volatilities on Vanguard Real and SPDR Portfolio and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Real with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Real and SPDR Portfolio.

Diversification Opportunities for Vanguard Real and SPDR Portfolio

0.04

Correlation Coefficient

Vanguard Real  SPDR Portfolio

Significant diversification

The 3 months correlation between Vanguard and SPDR is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Real Estate and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and Vanguard Real is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Real Estate are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Vanguard Real i.e., Vanguard Real and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Vanguard Real and SPDR Portfolio

Considering the 90-day investment horizon Vanguard Real is expected to generate 3.41 times less return on investment than SPDR Portfolio. In addition to that, Vanguard Real is 1.4 times more volatile than SPDR Portfolio SP. It trades about 0.02 of its total potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.11 per unit of volatility. If you would invest  4,786  in SPDR Portfolio SP on October 7, 2024 and sell it today you would earn a total of  2,429  from holding SPDR Portfolio SP or generate 50.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vanguard Real Estate  vs.  SPDR Portfolio SP

Vanguard Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Vanguard Real is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

SPDR Portfolio SP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, SPDR Portfolio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Real and SPDR Portfolio

The main advantage of trading using opposite Vanguard Real and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Real position performs unexpectedly, SPDR Portfolio can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.

The idea behind Vanguard Real Estate and SPDR Portfolio SP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.